To report on the Whitecross Private Finance Initiative (PFI) scheme and to consider the need for potential additional funding.

The Forum received a report on the Whitecross Private Finance Initiative (PFI) scheme and was asked to consider the need for potential additional funding.

The School Finance Manager presented the report.  He highlighted the following points:

·         Additional Funding had to be found to meet the costs of the PFI scheme to avoid an impossible financial burden being passed on to future ratepayers.

·         The need for additional payments was regrettable.  However, the proposal to share the additional payments equally between the Council and schools represented a reasonable compromise.

·         The PFI contract had been reviewed with the project’s original financial consultants.  Seventeen areas had been identified as worthy of further discussion with the PFI supplier.  Following those discussions 4 potential areas for savings had been confirmed. Contractually, the savings accrued to the school.  It was believed that Whitecross School Governors would consider a request to release the savings to the Council favourably so that the potential additional funding reduced.

·           In addition the PFI contractor had been asked to contribute to the savings by agreeing to move the basis of the calculation of inflation from the Retail Price Index to the Consumer Price Index.  This would make a significant saving. 

·         The report proposed a 3 year financial plan.  This would need to be reviewed if inflation rates were different from estimated and if savings were not agreed as expected.  A progress report would be made to the Forum in January 2015.

·         The financial pressure was due to a higher inflation rate than had been assumed in the contract. It had been common practice at the time for PFI schemes to assume that increased costs from higher than planned inflation rates would be met from increased income to councils.  That had not proved to be the case.

·         If inflation were to rise to levels of 10% or higher as had been the case in the past, then this would create a significant financial pressure on the PFI contract, requiring a more fundamental review of the contract, including possible changes to terms and conditions. Any such renegotiation of the contract would incur significant legal fees and involve complex negotiation with the provider and banks.

·         The contract had worked well and provided the County with an excellent facility that could not have been constructed otherwise.

(iii)    this position be reviewed if inflation increases take place above those anticipated;

(Following consideration of this item Mrs Strutt commented that the School was committed to seeking to reduce the cost of the contract as far as it possibly could.  It was a difficult position for the school which was mindful of the costs having to be borne by other schools as a consequence of the agreement.  She thanked colleagues for their support.)